Peter Swan

A passer-by happens upon a drunk searching for a lost wallet under a streetlight. With nothing in plain sight, the passer-by asks, “Where did you drop your wallet?”
“Over there,” gestures the drunk across the street, “but I’m looking here because this is where the light is.”

We often look for answers in the easiest place and not necessarily where the answer is to be found. As marketing moves from subjective art toward objective, data-driven science, are we seeing the emergence of a streetlight effect? Are even the very best big-data driven practices guilty of asking the wrong questions of the wrong data?

Most companies turn to analytics when early growth starts to slow. The familiar refrain, “Let’s make better use of our existing data”, heralds the onset of maturity, when the halcyon early days of triple and double-digit growth are well and truly past.

Initial questions asked of big data are typically, “Who are our best customers?” and “Which products are most profitable?” It soon becomes clear that performance differs by region, season and a host of other factors. So, it’s not long before we want to know, “How do quarterly sales in region A compare with region B, on products X, Y, and Z?”
Next comes propensity to respond (PTR) modelling, used to classify prospects for acquisition, cross sell, churn, or fraud. Where they exist, single customer views enable an entire family of PTR models used to determine next best actions.

Competing marketing priorities soon warrant marketing mix modelling (MMM), to estimate the marginal product of advertising spends across different channels.  Next, MMM naturally leads to attribution modelling, to estimate how each channel contributes to the final sale.

The current holy grail of big-data driven marketing is to offer in real time the most likely product, at the most likely price, to the most likely customer, at the most likely time, via the most likely channel.

But, does big data and analysis make sense in the first place? Like the drunk under the streetlight, have we been seduced into looking for the answers where it was easiest.  Namely, in the data we gathered from past sales to previous customers. But is this relevant for understanding future sales to future customers?

Nothing in the customer data gathered, or in the way it is presently being analysed, addresses the fundamental consumer desire to find the best available combination of price and product with the lowest search cost. All that segmenting and clustering and PTR scoring leaves our future consumers cold, stranded, outnumbered – feeling besieged and beset upon.

Consumers are boundedly rational humans optimised over generations for “fight or flight” and not for solving the n-dimensional optimisation problem that is rational consumer choice.

Tasked with buying a car, my siblings, with common genetic and environmental influences, will likely arrive at different consumption choices to mine. If those closest to me exhibit different preferences, then why are these “previous customer” strangers with no overlapping nature or nurture to me being used to suggest products for me?
Why model the choices of thousands of people I don’t know, and who don’t know me, in an effort to suggest products to me?

No consumer identifies with the clusters or segments thrown up by maximum likelihood (ML) models. All this ML exertion belies the constant state of flux wrought by Adam Smith’s invisible hand, and writ large in every single consumption choice.

It is a complex and rapidly changing world we inhabit with little known by these analytical models about my current preferences and circumstances.

The circumstances of markets, like those of individuals, can change in an instant.  Products sell out, forcing consumers to choose from what’s available or to wait. Products stagnate. Promotions and discounts alter the relative attractiveness of one product compared with another, stimulating sales of one and depressing sales of another.

Individual finances wax and wane as personal circumstances alter. Each and every purchase decision is a moveable feast. Even simple choices become rapidly complicated.  Little wonder consumers throw their hands up and head for the safe harbour of brand, or convenience, or availability.

The data we should be analysing − small data − is the time varying vector of product attributes and prices. This is the data consumers – your customers and your competitors’ customers – are using when choosing.

To the extent of their ability, each consumer is assessing, comparing and evaluating the products and services on offer as bundles of attributes with their corresponding “shadow prices”. Trading this attribute off against that, trying to identify the best combination of attributes with their shadow prices to suit oneself, taking into account one’s own dynamically altering preferences over the attributes and one’s own changeable circumstances.

What you should be doing is maximising the net utility of your potential customers, depending on the attributes of your product.
Analysing customer data to minimise the error of estimation, isn’t helping your customers to solve their problems – it is proliferating them. The manifold combinations and permutations are adding to the burden, not lightening the load.

Customers will pay you with their custom, for simply reducing their search costs. Faced as they are with overwhelming choice, customers want up-to-date, reliable, valid and trustworthy recommendations that embody their own personal preferences and budgets that are instantly available.

Peter Swan is a professor of finance at the Australian School of Business and co-inventor, with data scientist Stuart Dennon, of Choice Engine.

Julie Cogin

Smart phones are designed to make you feel indispensable. Forever on tap, on line, alert to the beep or vibration of an incoming message, you are chained to the workplace.

Imagine a CEO who is always available, a senior manager who can decide every major operational decision, whether in the office or on holiday.

What is this connectivity doing to workplace culture?

Managing talent and succession planning will fail if executives don’t delegate responsibility.

At an executive education session on talent management I presented recently, each of the 80 or so executives had their smartphone sitting in a prominent position on the desk in front of them.

The room was full of highly committed senior executives looking for the secret to attract, engage and retain the best talent in order to propel their businesses forward or outdo the competition. The behaviour of folks in the room was consistent with every other executive audience I have encountered in recent years. There was good exchange of views and listening to examples of workplace practices or troublesome issues.

Yet everyone leapt out of their chair for all breaks or group work activity to call the office or at the very least check their smartphone for email, text or incoming calls, certain something must have gone pear-shaped in their short absence. Every single person in that room had a smartphone accessible to enable regular (in some cases meant several times each minute) checks for action.

The irony of the situation was that this behavior is a major impediment to talent management – the very topic of the day. Let me outline three reasons why.

First, if you can always be contacted to deal with emergencies, urgent situations or the usual bushfires that come up you’re not encouraging others to make decisions in your absence or assume greater responsibility. By not providing employees with the autonomy to make decisions about how they can best deal with difficult situations you reduce their motivation and ability to take risks, try new things and be creative.

Remember the days when senior executives took leave and someone talented was coached and prepared to “act up” in that role? What a win-win situation for the person on leave who could really experience the benefits of a vacation or professional development opportunity – as well as the individual with the chance to develop new skills, be exposed to matters they may not be in their regular job and gain experience or recognition to prepare for their own advancement. It seems this approach is now lost.

Second, the addictive smartphone behavior I observed during this session (and on many other occasions) where executives immediately answer emails and phone calls any time of the day (and night), encourages that behavior in others. The cascading effects are likely to block the development opportunities of those below and impede succession planning right down the line. Also important is the signal sent across the organisation on managing work and non-work responsibilities, let alone the message this communicates on well-being.

Third, during the session those most addicted to their device argued that they wanted to be “available” to their teams (and boss) or it was an extremely busy time of year, while some confessed to a high sense of wanted to be needed or in high demand. And while I don’t believe anyone is indispensable to an organisation, creating a situation where you are in a high-demand position, invaluable or needed for all key decisions prevents your own progress to more interesting roles. 

A key component of any talent management program is the “make” versus “buy” decision. Irrespective of whether you “make” your talent internally by developing people for roles or “buy” your capabilities in from the labour market, both require a concentration on improving the return on investment efforts (from recruitment or development activities).

This means protecting that investment by creating a work environment where people can thrive and want to remain as well as generating sufficient internal opportunities to enhance skillsets. And there is no better way to improve a skillset than by temporarily promoting talent, where you can also test them by seeing how someone performs before giving them a ‘leg up’ the corporate ladder.

Also – from a purely accountant’s perspective – if you look at the costs of recruiting staff, and the risks inherent in taking on a virtual unknown, it is clear that internal promotion has obvious advantages: firms can save a lot of money by promoting those with obvious abilities, and the only way to do that is if the hierarchy permits a temporary promotion to see how they perform.

Having their boss switch off – both physically and mentally – for a couple of weeks is a great way to do this. The boss won’t be away long enough for any real damage to be done if those standing in prove mediocre, but it’s long enough to give a good test run, and see if promoting talent is a cheaper alternative than ‘buying’ someone new in.

I am a big supporter of smartphones, laptops and other mobile technologies as they can enhance productivity, provide greater freedom and flexibility, however they also may be your organisation’s major impediment to talent management.

However switching off that phone and having genuine time out of the office is the best way of securing talent for the next generation – and saving the company money.

Fred Hilmer

The proposal by NBN Co that it should be freed up to allow it to compete with rival private operators such as TPG Telecom highlights the dilemma facing government when it seeks to achieve a social goal by creating a monopoly.

The NBN’s competition policy problems began from its conception when it was established as a legislated monopoly. The justification was that a monopoly, given its substantial power to set prices, would be able to offer an equivalent service at an equivalent price to all Australians, whether in the remotest outback or the high-density parts of the cities.

This goal, to be met via a monopoly (rather than a competitive model with transparent subsidies) was argued to be the best approach to establishing universal high-speed broadband access.

The NBN, however, is not a natural monopoly. The basis of the NBN monopoly is regulation, not economics. Natural monopolies – such as the electric power grid, the rail track or gas and water distribution networks – cannot be economically replicated by a competitor. Natural monopolies have considerable power to set prices without needing legislative protection and, hence, are subject to structural separation and price regulation.

Monopolies created by regulation rely on the regulatory barrier to be able to set prices and price structures. Without regulatory protection, much of what monopolies such as the NBN would like to do can be picked off by competitors, as TPG has demonstrated.

Hence, the only way the NBN monopoly can be protected is by cast iron, loophole-free regulation. However, monopolies created by regulation are inherently fragile. As George Stigler wrote, “Competition is a tough weed, not a delicate flower”. And tough weeds find even small cracks in the pavement to break through.

In the case of the NBN, there are two major “cracks in the pavement” that are becoming apparent even before the NBN is built. The first is cross-subsidy. Urban users have to pay more than the costs of serving them, while remote users pay less than cost. As a result there is an enormous incentive for potential competitors to break the monopoly and serve urban users at lower prices that nevertheless produce good profits. TPG may have found a loophole that allows this.

But I can confidently say that even if this loophole is closed, others will emerge. The reason is because of an even larger crack in the monopoly pavement – new technologies that erode monopoly power.

We have seen how legislated restrictions on competition can be blown away by technology. One need look no further than the media industry where cable and the internet have eroded the value of legislated TV licences. Importantly, these new technologies have created jobs and supported economic growth.

These two forces complement each other, as the financial incentive in serving the most attractive customers triggers technological innovation.

And herein lies the real dilemma, so often ignored when competition policy is debated. It is generally clear what competition, if allowed to work, will do to inefficient competitors or the products and services that are overpriced.

These consequences are highlighted as doomsday scenarios — the end of important and much loved activity and employment, such as an aircraft maintenance base or a call centre. Moreover, the pain is felt acutely by few, who can be quite vocal, while the benefits are diffuse.

But what is left out, and is generally unforeseeable, is the range of new jobs and new opportunities a competitive environment creates. Recall what happened when airlines were deregulated. Jobs were lost in the airlines, but far more jobs were created as coastal communities developed tourism and the second home market on a scale not imagined when the deregulation was proposed.

What then should the government do — keep cementing over cracks in the pavement, or accept that the monopoly is neither sustainable nor in the public interest? In the latter case, look after the remote users by direct subsidy rather than relying on an unstable monopoly? Maybe it is too late for such a fundamentally different approach.

But maybe the adage, “the first loss is the best loss” will again be proved right.

Professor Fred Hilmer is the vice-chancellor of the University of NSW. This post has appeared in The Australian Financial Review.

Peter Swan

On Thursday the Gillard Government launched Phase 2 of their High Speed Rail study that was produced as part of a political agreement with the Greens.

The very optimistically projected cost is $114 billion for 1,800 kms of rail to link Melbourne to Brisbane via Canberra and Sydney. Approximately 8% of the route requires exceedingly expensive tunneling, giving huge scope for costs to blow out.

The projected (internal) financial return is 0.8% compared with a minimum of 15% to be considered for a commercial project. Hence it could never be financially viable and is likely to require on-going subsidies even if the Government provided the entire capital cost.

Can the project be justified in cost-benefit terms? Certainly, the Report claims that there is a positive benefit/cost ratio at low discount rates with the benefits roughly equal to the costs with a 7% discount rate.

These benefits consist of consumer and producer surplus. It is my belief that these benefits are likely to be vanishingly small in practice with the costs far outweighing the benefits.

These benefits are assumed to arise largely from time savings due to better access and egress compared with airports such as Tullamarine. A high-speed rail connection between Tullamarine and the City could be built for less than $114 billion with considerable time and convenience savings. There might even be some spare change.

Such assumed time savings also presumably drive the 55% of passengers who are assumed to switch from air to rail and the 19% induced passenger increase.

It is hard to imagine that the 23% of passengers that are assumed to switch from cars will gain sizeable subsidiary benefits to motivate a switch. In fact, many who currently drive will face car-rental and other out-of-pocket costs that are likely to be sizeable.

In my view, these passenger estimates are likely to be even more upward-biased than the pie-in-the-sky estimates that led many toll-road providers to the bankruptcy in both Sydney and Brisbane. Projected toll-road/tunnel usage exceeded the reality, typically by 100% or more.

At least one would think that private providers taking and equity stake would be cautious in accepting ludicrous estimates of traffic projections. Governments looking for juicy election bribes have no such hip-pocket concerns. All of these failed projections tended to give excessive weight to traveler time-saver benefits.

The first question to ask is what is a high-speed rail network? It is largely duplication of air passenger routes provided for ‘free’ by nature. Unlike air-routes high-speed rail is exceedingly capital intensive with an exceedingly long gestation period.

The Report projects that cash-flow will be positive for the first time around 2060, about 45 years after commencement. Once of the few routes that is commercially viable is in major Japanese city pairings with population density about 1,000 times higher than major pairings in Australia.

Even Japanese bullet trains received a bailout in 1987 and Taiwan’s line needed rescuing only two years after commencement. In China the high-speed network is highly problematic with severe speed limitations imposed on some lines. One line was even reduced to 45 kms an hour. Even in much denser Europe, only a few city pairs are financially viable.

There is no indication that any success will be achieved in North America. The Californian line that commenced in 2008 had spent $630 million within three years without constructing even one kilometer of track.

Thus the benefits of high-speed rail are largely illusory, especially in Australia with its exceptionally low population density and existing network of relatively efficient airports. Removal of curfews could greatly improve airport efficiency, especially in Sydney. Unfortunately, the costs are not illusory and are likely to be massively understated in the Report.

There have been quite few very-fast train schemes in Australia, mostly centering on the Sydney-Canberra-Melbourne corridor.

The first one was proposed by the then head of the CSIRO who carried the appropriate handle of ‘Wilde’. Hence the ‘Wilde scheme’, of which the latest incarnation from the Gillard Government is yet another example of an exceedingly white elephant.

It is also well timed as a tempting election bribe where it joins the Gonski Report into school funding, the National Disability Scheme and numerous other unfunded projects.

Professor Peter Swan is the Professor of Finance at the Australian School of Business.

From the Knowledge@Wharton today blog.

The IT-BPO industry in India, which established the country firmly on the global map with its outsourcing and offshoring capabilities, is also the largest employer of women in the corporate sector in the country. Of its total pool of around three million direct employees, 30% are women. Pointing this out at the recent Diversity and Inclusion Summit 2013 organized in Bangalore by the National Association of Software and Services Companies (Nasscom), industry leaders and other speakers stressed the business imperative for companies to ensure a fair and equitable environment for their women employees.

At the same time, they were also emphatic that the concept of diversity needs to be all-inclusive and move beyond gender to aspects like differences in physical capabilities, culture, lifestyle, age, religion, economic status and sexual orientation. “We started with a focus on gender inclusion in a formal way in 2007, and much of our attention is still on gender diversity because a lot more still needs to be done on this front. But we are now also focusing on the many other aspects of inclusivity because we realize that a diverse customer base cannot possibly be served well by homogenous organizations,” said Som Mittal, president of Nasscom.

According to Therace Risch, vice president, delivery services technology at Target Corporation, there are two key reasons to drive diversity and inclusiveness in any organization. “One, when an organization has a diverse workforce, it understands the needs of its customers better and makes better decisions for them. Two, when people feel included in their organizations, they produce better results.”

Avinash Vashistha, chairman and manager of Accenture India, pointed out that it is important that organizations put in specific metrics to measure the outcomes of various inclusivity initiatives. “Measurements,” he suggested, “are important because they help us to know what is working.” Target’s Risch, however, added a note of caution. She pointed out that mindset and cultural changes take many years to create a visible impact, and sometimes leaders are disappointed if the results are not quick enough. “There is then a danger that the initiative may get neglected.”

N. Krishnakumar, co-founder, CEO and managing director of consulting firm MindTree, noted: “Organizations must take care that they don’t end up recruiting certain candidates only to meet their diversity targets. At the end of the day, what is important is to assess the potential of every employee and create an enabling environment for them to deliver their best.” Padmaja Alaganandan, executive director, people and change at PricewaterhouseCoopers, added another perspective. She pointed out that it was critical that any measures towards inclusivity should not be misunderstood as preferential treatment. “It is important for [a] business to get the most suitable person for a specific job. What is needed is a performance-based inclusive workplace.”

This post was previously posted in Knowledge@Wharton Today Blog: Indian IT Firms Focus on the Business Case for Diversity

From the Knowledge@Wharton today blog.

A lower-end iPhone could prove to be a smart move for Apple, Wharton experts say, but the company has to proceed carefully.

Following reports that Apple is at work on a lower-priced iPhone expected to be in stores by the end of the year, Wharton operations and information management professor Eric Clemons notes that versioning is nothing new for tech products: Adobe Photoshop has a lower-end “kid sister” in Photoshop Elements, for example, and many database software programs offer scaled-down applications intended for student use.

“Luxury goods manufacturers often need to protect their image: A cheap Bentley or a cheap Mercedes would be a bad idea — the original G20 Infiniti sedan was an awful idea,” for example, Clemons says. “But, if done properly, a lower-end version can work well — the new Infiniti G37 is a wonderful car. So Apple needs to make sure that a starter iPhone increases sales, does not cannibalize sales excessively from the full iPhone and does not damage the exclusive image of the iPhone.”

While Apple is known for developing cutting-edge devices, “sometimes it also makes sense to fill the lower end of the product line as well,” according to Wharton marketing professor Peter Fader. Although some critics suggest that news of a lower-priced iPhone indicates that the company is no longer focusing on product innovation as it once did, Fader takes an opposing view. “Developing a low-end device doesn’t necessarily prevent or distract them from simultaneously pushing ahead at the high end,” Fader notes. “Furthermore, there are a lot of valuable commercial opportunities to be gained at the low end.”

Apple has long been known to stick to its guns about charging a premium price for its products and, for the most part, a critical mass of customers has been more than willing to pay it. Kendall Whitehouse, Knowledge@Wharton’s technology and media editor, recalls that back in the 1970s, the company’s Apple II personal computer was competing for market share with products from Atari and Commodore. While the latter two became embroiled in a price war that dropped their respective systems’ price to a fraction of the Apple II, “Apple remained above the fray, held onto its high price — and large margin — and did very well,” Whitehouse notes. “In the next decade, Apple continued to charge a premium for their Macintosh systems when confronted with competition from lower-priced PC clones, even if it hurt their market share.”

After launching the iPod in 2001, however, Apple gradually introduced a line of lower-priced models. “But this was driven largely by the falling prices of flash memory and Apple’s desire to drive revenue through iTunes,” says Whitehouse, noting that while Amazon.com has based its strategy for the Kindle around selling the device at cost — or even at a loss — and making its primary revenue through content for the tablets and e-readers, Apple has done the opposite.

“While songs and apps sold through iTunes generate a strong revenue stream, iTunes’ main function is to drive sales of Apple hardware: iPods, iPhones and Macs,” Whitehouse points out. “Of course, getting iPhones and iPods into people’s hands produces a halo effect for their laptop and desktop computers, so [a lower-end iPhone] may make sense if they see greater revenue through these upselling opportunities.”

This post was previously posted in Knowledge@Wharton Today Blog: Advice for Apple: Strategizing a Lower-end iPhone

From the Knowledge@Wharton today blog.

While optimism among companies in the U.S. and Europe seems to be growing, the big question for Indian offshore information technology (IT) vendors is whether this positive sentiment will convert to actual IT spends. A recent study by Offshore Insights, a Pune-based IT research and advisory firm, notes: “[The] mood looks positive compared to the past two years … [and] many clients intend to spend more in the coming year.” The study suggests that while around 14% of those surveyed plan to increase their budgets by 5% to 10% over last year, around 43% will increase it up to 5%. At the same time, around 27% expect to see no change and 12% expect a drop in their IT budgets.

According to Sudin Apte, CEO and research director of Offshore Insights, the survey indicates that while 49% of the firms continue to see the coming year as being challenging, 41% are optimistic regarding their business outlook. (The rest say that it is too soon to take a stand.) Apte, who was earlier with Forrester Research, notes: “A couple of years ago, we saw that the majority of clients were not taking decisions and were even cancelling projects. Decisions that were being delayed will now be taken in the coming year, but budget increases are going to trail sentiments.”

Apte points out that enterprise applications, applications integration and modernization are emerging as high-growth areas. “Our survey also shows that while the adoption of emerging technologies is maturing, we are not seeing big deals happening in this space,” he adds. “Big data projects and mobility deals are small and sporadic.”

More importantly, the survey indicates that compared to large on-shore services firms like IBM and Accenture, Indian offshore providers lack adequate client centricity. “Clients do not find Indian providers genuinely client centric. And they feel that while MNC services firms are catching up in cost saving, quality and software process, Indian firms are not moving up fast enough regarding domain knowledge and consulting expertise,” says Apte. The study also points out that clients clearly want vendors to deliver business benefits “far more than ever in the past.” Their top priorities include improving IT’s impact on business performance, increasing IT resources to drive business innovations and improving business processes by using IT.

Companies, meanwhile, are fine tuning strategies – in geographies, verticals and billing models. Infosys is increasing its focus on Europe. As a first step, it plans to shift its listing from Nasdaq to the New York Stock Exchange (NYSE). This will make it easier for European investors to trade through the NYSE Euronext platform. The company expects this to improve its branding in Europe and, therefore, its business.

The Bangalore-based Mphasis has taken another step in its strategy to focus on select micro verticals. It has announced the takeover of U.S.-based analytics firm Digital Risk in an all-cash deal for US$175 million. Last year, it had taken over U.S.-based insurance software vendor Wyse Corporation. Mphasis, a mid-tier company, likely realizes that the big players will always have an edge in the undifferentiated BFSI (banking-financial services-insurance) space.

In a radical departure, iGate Corp., a Nasdaq-listed firm which has the bulk of its delivery team in India, has recently launched a high-decibel multi-million dollar marketing campaign in North America promoting an outcome-based business model instead of the traditional time and material (T&M) model adopted by most Indian IT firms. (Under the T&M model, vendors charge their clients based on the number of people and hours spent on a project, irrespective of the final business benefits to the client.) Industry observers note that while some other Indian vendors also have started on the outcome-based route, they still have a long way to go.

Meanwhile, despite sceptics in the IT industry, the National Association of Software and Services Companies (Nasscom) has stuck to its earlier growth projections, only it will be closer to the bottom end of its range. As against its earlier forecast of 11% to 14% growth for financial year 2012–2013, a few weeks ago Nasscom pegged it at 11%. In a statement, Nasscom said: “For FY2013, a year marked by significantly varied trends, the industry is expected to meet the lower-end of its growth guidance and at least achieve a double-digit growth.”

This post was previously posted in Knowledge@Wharton Today Blog: Spending on IT Services Increases – but Demands Grow, Too

From the Knowledge@Wharton today blog.

As probably the whole word knows by now, Pope Benedict XVI plans next week to start tweeting in eight languages. His Twitter handle is @Pontifex, and he has already generated several hundred thousand followers even before his first official tweet, scheduled for December 12.

The pope’s decision to open a Twitter account raises a number of questions, including: Is this a good marketing strategy? Will it help the Catholic Church reach out to younger generations, and will those younger generations tweet back? What kinds of messages should the pope tweet? Finally, does the pope seem a little late to the game, since, as FastCompany.com noted today, he joins “an impressive, highly retweeted group of religious leaders,” including such names as the Dalai Lama, Joel Osteen, Rick Warren, the Rev. Jesse Jackson, Sr. and Rabbi Shmuley Boteach.

Wharton marketing professor Jonah Berger suggests that the pope’s new communication strategy is a good marketing decision for the Vatican. “As technology advances, religion often gets less attention. This raises the church’s profile and reminds people it is relevant to [our] day and age.” As to whether this strategy will help the church reach the coveted younger generation, Berger predicts that most of this age group won’t respond, “but some will. Churches have a target market just like Pepsi does. And this is another channel to reach that market.”

What kinds of messages should the pope tweet – and what kinds should he avoid? Berger’s advice: “Be authentic. A formal ministry in Japan started tweeting using slang, but people found it incongruous. No one wants to hear the pope talking about YOLO [you only live once] or using phrases like OMG. Tweeting useful information about faith or inspiring stories will spread their ideas while staying true to the [church’s] core message.”

Wharton marketing professor Peter Fader says the pope’s foray into Twitter “seems entirely sensible and natural to me. Twitter is nothing more than a personalized broadcasting channel. No one would think twice if the pope had his own radio station or cable channel. Perhaps he already does.” It makes sense for him, “and any other highly visible person/organization, to have a way to share information, perspectives and other relevant content with followers.”

In that respect, Fader sees Twitter as “very different from Facebook. I actively use the former, multiple times a day, but very rarely use the latter. I find it very valuable to be able to offer one-way broadcasting about my work, and find it equally valuable to read the broadcasts from other people/organizations that interest me. I’m not interested in having conversations.”

Fader laments what he describes as Twitter’s “cutesy name. If it were just called ‘micro-blogging,’ no one would think twice or raise eyebrows that the pope is doing it.”

According to an article in The Wall Street Journal, the Vatican already uses other social media tools such as Facebook and YouTube. In addition, the pope’s “first tweets will be in response to questions put to [him] via Twitter about faith; the pope isn’t likely answer queries unrelated to religion.” The Vatican’s media advisor adds that the pope “won’t physically write each tweet, [but] will be personally involved in what it says,” the Journal reports.

Given that other religious leaders are already tweeting, does Pope Benedict XVI seem a little late to the game? “So maybe he’s a little late, but better late than never.” Fader says. “And as long as [Twitter] is used in an appropriate manner – and I’m sure that will be the case – then I don’t see any downsides to it at all.”

Adds Berger: “No one is counting. Or expecting the pope to be on technology’s bleeding edge.”

This post was previously posted in Knowledge@Wharton Today Blog: The Pope on Twitter: 140-character Sermons?

From the Knowledge@Wharton today blog.

Technology has altered consumer product marketing from a top-down, somewhat paternalistic enterprise to an immediate experience that has more in common with a door-to-door salesman. Within the last decade, hordes of middlemen or third-party distributors have been obliterated from corporate flow charts. Instead, major manufacturers are hearing their products praised and castigated directly from consumers. And many of those consumers have a potentially powerful and infinite network of “friends.”

Measuring and managing that constant flow of feedback is the greatest challenge facing modern marketing managers, according to Peter Fader, a Wharton marketing professor and co-director of the school’s Customer Analytics Initiative. Fader moderated a panel discussion on the topic at the recent Wharton Marketing Conference.

Within the 90-minute discussion, six experts from leading consumer products companies described technology in general and social media in particular in a variety of ways, ranging from gift to burden. They toyed with words like “enabler,” “channel, partner,” “buzz meter,” “tsunami of data” and “problem generator.” One panelist hailed digital technology as a teaching moment because companies that monitor the web may uncover misinformation about their products and respond.

“There’s way more data now, and it’s a lot more work. Those days of meeting once a year to launch a single marketing campaign are over,” said Ryu Yokoi, senior brand manager for Unilever, a multinational company with headquarters in Rotterdam and London. “On the other hand, the feedback is very tangible and a lot more fun.”

A self-described “pop culture junkie,” Yokoi begins his day scanning the digital landscape for innovative promotions from Amazon to Living Social, and for online chatter about Lipton Tea, his major responsibility for the company. Other Unilever brands include Hellmann’s, Dove, Breyers, Ben & Jerry’s, Skippy and Vaseline. “The one place I don’t want to see our name is the “Condescending Corporate Brand” page on Facebook, [which] rips companies for posting what they consider dumb and insulting content on their Facebook pages.”

Frequently characterized as the word-of-mouth platform, Facebook is a critical tool, but not the only tool for getting out a marketing message on social media, noted Janis Fratamico, director of client experience for IBM Global Client Centers. “The truth is a lot of these Facebook pages have no value. It’s easy to be overwhelmed by the quantity and we recognize that we are not effectively using all the social media that is out there already.”

According to Amy Saunders, director of Johnson & Johnson’s digital center of excellence, the New Brunswick, N.J.-based company uses everything from old-style marketing, such as putting promotions on hospital maternity ward TV networks, to new media-influenced strategies, like analyzing skin problems based emailed photos from consumers.

As online buying continues to grow, so does showrooming, a trend in which consumers shop around at retail stores to examine products and pick the brains of sales clerks before actually buying from an online source offering cheaper prices. “It is a concern because we don’t want to be competition for our retailers,” noted Saunders, who has crafted multi-channel marketing strategies for J&J brands including Neutrogena, Aveeno, Listerine, Visine and Zyrtec.

Her concerns were echoed by Jeremiah Marble, a product manager for Microsoft. ”People want to touch a new phone and experience it in a tangible way,” he said. “Striking that balance between virtual and real customer contact is a challenge.”

Jeff Bedard, marketing director for Chase Sapphire, shared an anecdote that revealed the potential hazards for marketers from an annoyed customer with time to burn and a smartphone in his or her hand. Chase Sapphire is the credit card division of New York-based JPMorgan Chase.

A customer, he recalled, was annoyed with the long line ahead of her at a Chase bank branch. She grabbed her phone and began trashing the bank’s service in a tweet. A Chase social media monitor responded immediately to the tweet and asked if he could help her transact her business online instead of waiting for a teller.

While Chase Sapphire strives to be cutting edge in a competitive business, Bedard calls new technology “a gift to marketers,” but inevitably problematic. “The challenge is to uncover those problems and solve them before they get out of hand,” he said.

Technology can introduce moral dilemmas as well, noted Avi Mannis, vice president of marketing for Hawaiian Airlines. To illustrate, he proposed a common scenario in his business: lost luggage. “Do we go out of our way to help the customer with thousands of Twitter followers or the person who has none?” he asked. “Sometimes, technology can be a burden.”

This post was previously posted in Knowledge@Wharton today blog: Navigating the Multi-channel World of Modern Marketing

From the Knowledge@Wharton today blog.

Last week, Facebook announced that it was stepping up its efforts in the job search and recruitment arena by offering a new app that allows users to peruse employment opportunities aggregated from existing job boards such as Monster, Jobvite and BranchOut. Although Facebook is already viewed as an active but informal platform for job seekers who want to network, the company’s “Social Jobs” app will allow users to search approximately 1.7 million jobs by keyword and location, and then apply for positions without leaving the site. Facebook users can also share open positions with others in their networks by “liking” those jobs. The app is the culmination of a yearlong partnership with government agencies and human resources consortia, including the U.S. Department of Labor and the Direct Employers Association.

What does this new development mean for Facebook, its users and major players in the job search market, such as LinkedIn? K@W Today asked Wharton marketing professor Pinar Yildirim and Wharton emeritus management professor Lawrence G. Hrebiniak for their take.

K@W Today: Strategy-wise, is this a good move for Facebook?

Pinar Yildirim: Since its IPO, Facebook has been feeling the pressure to make business moves that will bring in quick money for its shareholders. This pressure results in some moves with short-term benefits but long-term costs.

Facebook started out as a social platform for a homogenous clientele. It had college students who shared similar interests and lifestyles. Users on Facebook felt comfortable sharing information and networking with close friends. It allowed for an easy and time-efficient way of keeping in touch. As Facebook gradually got larger and larger, the average user started adding her boss, parents, colleagues, neighbors or the random stranger she met at a party to her network. Her network was no longer homogenous. The quality of information shared among friends also went down significantly. Overall, users started to share less and less personal and intimate information.

Trading in quality of information for volume was a mistake, because the archive of personal information is the biggest value of Facebook to advertisers. Imagine what an opportunity it provides when a consumer shares personal information; [an advertiser is] able to target a consumer as soon as she shares information on everyday events — like where she is going out that night, what TV show she is hooked on, etc. — or life events like getting engaged, becoming pregnant, breaking up with a boyfriend and so on. Yes, Facebook added features like lists and friend groups to prevent the quality of information shared from going down, but let’s be honest: The average consumer is lazy, busy and not keeping up to date with settings on every website she uses. Most people would rather post less private information than spend hours creating lists of friends.

Facebook missed an opportunity and has been seeing disappointing advertising numbers. As a result, it is now turning to other options. Social jobs is one of them. Integrating ads into feeds is another attempt. I expect many others to follow.

In the short term, the Social Jobs app might help Facebook raise money as corporations will pay for posting jobs on Facebook, particularly given the unemployment numbers. Many firms are interested in getting personal information on a candidate. But in the long term, this move is likely to further degrade the quality of information people share. Users will be more careful about what they say or post on Facebook, because it might be evaluated by a potential employer one day. And this might further hurt the advertising dollars.

In summary, it is a good short-term move, but likely to have negative consequences on advertising in the long term.

Lawrence G. Hrebiniak: The Social Jobs app is a good strategic move by Facebook…. Facebook has a massive user base, and the Social Jobs app allows it to build on its people-reaching capabilities and grow in an area in which the company currently has a minor presence. This clearly is a strategic move [for Facebook] to test its mettle against LinkedIn, and the targeted company shouldn’t take Facebook’s actions lightly.

K@W Today: What will this mean for LinkedIn?

Hrebiniak: LinkedIn’s Talent Solutions unit is its bread-and-butter, revenue-producing division, and Facebook would like a big bite of this lucrative market. Of this there is no doubt. The drop in LinkedIn’s stock price after Facebook’s announcement is strong evidence that investors clearly see the looming threat to the company.

LinkedIn currently has good working relationships with headhunters and a history of effective performance serving them. It needs to use these contacts to continue differentiating its capabilities in the marketplace. It must work hard to ensure that Facebook doesn’t become more than a simple list of jobs, and must use its strengths to keep Facebook from gaining traction with its headhunters and other allies. This is a strategic shot across LinkedIn’s bow, and it had better respond to the warning. This will be a battle of muscle vs. muscle, and it will be interesting to see how it plays out.

Yildirim: LinkedIn will have competition, but users of LinkedIn created more than just resumes in the past years. They created communities; they established interest groups. And there are consumers with existing subscriptions. Switching will be costly.

On the other hand, Facebook can become a serious rival for jobs where social skills matter. Sales positions and jobs in the entertainment industry are examples. Facebook can offer years of proof of leadership, communication and social interaction information history and photos. LinkedIn cannot yet offer such information or information on the personality of a person outside of the work environment.

K@W Today: Are traditional job boards like Monster.com and Indeed likely to disappear altogether?

Yildirim: It is important to listen to what past bosses, clients and co-workers say about a candidate during the hiring process — but not necessarily for every position. There are many positions where firms simply do not have the time or desire to collect information on a person’s social life. Or they prefer to evaluate the candidates through their own filtering mechanisms. Similarly, for highly skilled or specialized jobs, resumes matter more than what others say about you. There will be traditional hiring for such jobs, and traditional job sites will survive.  

K@W Today: Do you see any privacy concerns for Facebook users with this development?

Yildirim: I see many privacy concerns with online social networks and search engines, simply because they sit on too much private information and they archive it. Personal information is collected over the course of one’s life. Kids born today will have a digital archive of their entire lives online — initiated by their parents posting baby pictures on Facebook, [followed by those kids] creating a Facebook page at a very young age.

Such archives might become very useful one day for advertisers and researchers, but at the same time, they will be a headache for some others…. It is up to people and policy makers to say “no” to the archiving of their personal data beyond their approval.

A final note: I expect markets to create paid alternatives to firms that violate privacy. The number of such alternatives and small initiatives are increasing. DuckDuckGo (a search engine focusing on privacy) is an example

This post was previously posted in Knowledge@Wharton today blog: Facebook’s New ‘Social Jobs’ App — Like or Dislike?